Goldberg: Time to Help States Make Lemonade on Issue of Long-Term Care?

The nation has no viable strategy to help people finance their long-term care

The enactment of the American Taxpayer Relief Act of 2012 averted the so-called fiscal cliff, but it also repealed the Community Living Assistance Services and Supports Act that was intended to create a public mechanism to help people pay for long-term services and supports if they become disabled.

The repeal was not a surprise. More than a year ago the administration abandoned plans to implement CLASS after it became clear that premiums for the program as designed — with participation to be voluntary rather than mandatory — would be too high to attract more than a tiny percentage of the population.

CLASS was flawed, but it was the first major effort in decades to provide an alternative to impoverishment and welfare for millions of working-age people who at some point will need long-term services and supports. With the decision to repeal CLASS rather than amend it, the nation has no viable strategy to help people finance their long-term care.

Meanwhile, the private long-term-care- insurance industry has imploded. Five of the top 10 carriers have left the market or are headed that way. Many of the remaining policyholders have seen sharp increases in premiums, and most Americans either feel they can’t afford or can’t qualify for today’s stand-alone products. The market has spoken, or at least mumbled.

So what comes next? In repealing CLASS, Congress created a commission to “develop a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality system that ensures the availability of long-term services and supports for individuals.” The commission also is charged with making recommendations to improve the size, skill and labor market conditions of the long-term-care workforce.

The commission has been given all of six months to come up with recommendations and legislative language on issues that have stymied policymakers for decades — at a time when Washington remains locked in deficit reduction mode. The commission could suggest fixes that would make CLASS financially solvent, but such changes likely would go nowhere in a political climate focused on deficit reduction and proposals that have the potential to shift more, not less, of the financial risks of aging to individuals.

Optimism about the commission is not high. Its resources will be few and there is no commitment from Congress to vote on recommendations. Congress needs to step forward and provide leaders from both parties to champion the recommendations, lend key staff members to advise the commission in shaping politically palatable solutions, and then agree to give the ideas an up-or-down vote.

Are there policy solutions that help people prepare for the potential need for long-term care beyond urging them to save more? One much-praised feature of our federalist system is the opportunity for states to function as “laboratories of democracy” by launching novel social and economic experiments that, if successful, can then be adapted and implemented nationwide.

Policymakers in Hawaii have just heard from their own long-term-care commission whose excellent final report recommends a mandatory social insurance program that would provide a monetary benefit for people needing long-term services and supports. The mandatory program has modest ambitions, but it would help many older Hawaiians avoid or delay staying in a nursing home; it likely also would reduce the growth in Medicaid expenditures.

Perhaps the most constructive thing the new federal commission can do is to facilitate state experimentation with social insurance programs that encourage people to plan ahead for and contribute to their long-term-care needs.

Noting the broad waiver authority the administration has under section 1115 of the Social Security Act, Congress could endorse the idea of state waivers that would allow states that pursue social insurance programs to share in federal Medicaid savings that result; Congress also should give states incentives to use registries, care coordinators and other parts of their Medicaid infrastructure to serve a general population in need of assistance navigating the long-term-care marketplace. Both of these would be significantly more cost-effective than additional tax breaks for private long-term-care insurance that, by themselves, generate very little new enrollment.

Although the need for a broader national approach to long-term care remains urgent, the next few years may be a time to focus on what states can do to complement changes in the delivery system as we implement the health care overhaul. Addressing long-term services and supports is not an all-or-nothing proposition. It is not necessary to address all the risk that individuals face to improve the current situation. In the face of federal paralysis, there may be political and practical wisdom in focusing on incremental changes at the state level. In short, this could be a good time to make lemonade.

Lee Goldberg is vice president for health policy at the National Academy of Social Insurance.